The Supreme Court seems to be bustling this week with interesting cases, but today brings two cases that corporate law scholars may have an interest in watching.  IFor the past several years, the corporate scandal arena has seen a flood of cases against corporate officers with counts under the federal "honest services" amendment to the mail and wire fraud statutes.  (Section 18 U.S.C. s. 1346 specifies that "scheme or artifice to defraud" as used in the mail and wire fraud statutes, 18 U.S.C. ss. 1341, 1343, means any "scheme or artifice to deprive another of the intangible right of honest services").  This term, the Supreme Court is set to hear three honest services cases, and two of them are being heard today.  The provision has wrecked many lives, from the Enron Broadband defendants to the NatWestThree.  During this time, many appellate jurists, from the Fifth Circuit to Justice Scalia, have expressed some concern about the dubious uses of this catch-all statute.  (For some background,the December ABA Journal traces its origin as a congressional move to make proving political corruption (depriving state employer of honest services) easier to its now widespread use in various criminal arenas.)

If the intent of Congress was to make it easier to convict those thought to be engaging in fraud, then the honest services provision does meet that goal.  Neither a profit to the would-be fraudster nor a loss to the fraudster's employer needs to be shown.  Basically, the defendant has to do something job-related that doesn't seem "honest" or that doesn't seem to be in the interest of the employer.  In corporate law, we call that an agency loss, and of course my colleague Larry Ribstein would aptly call the statute the "criminalization of agency costs."  To emphasize, under this provision, Mr. Salmon would go to jail for not disclosing to Mr. Meinhard the opportunity to develop that nice corner of Fifth Avenue.  And, all of you who ordered merchandise off of your work computer on Black Monday might start getting a little nervous, also.

So, today, the Supreme Court heard Black v. United States this morning and is hearing/is about to hear Weyhrauch v. United States this afternoon.  The first case is in the corporate fraud arena, and the second is in the traditional public corruption arena.  Conrad Black was charged with depriving his company of honest services by taking a $5.5 million management fee in connection with the sale of three large newspapers.  Here is the relevant question presented in that case:

•This Court held in McNally v. United States, 483 U.S. 350 (1987), a public corruption case, that the mail fraud statute could not be used to prosecute schemes to deprive the citizenry of the intangible right to good government. Congress responded in 1988 by enacting 18 U.S.C. § 1346, which expands the definition of a "scheme or artifice to defraud" under the mail and wire fraud statutes to encompass schemes that "deprive another of the intangible right of honest services." Twenty years later, the courts of appeals are hopelessly divided on the application of Section 1346 to purely private conduct. In this case, the Seventh Circuit disagreed with at least five other circuits and held that Section 1346 may be applied in a purely private setting irrespective of whether the defendant's conduct risked any foreseeable economic harm to the putative victim. In the alternative, the Seventh Circuit ruled that the defendants forfeited their objection to the improper instructions by opposing the government's bid to have the jury return a "special verdict," a procedure not contemplated by the criminal rules and universally disfavored by other circuits as prejudicial to a defendant's Sixth Amendment rights.

1. Whether 18 U.S.C. § 1346 applies to the conduct of a private individual whose alleged "scheme to defraud" did not contemplate economic or other property harm to the private party to whom honest services were owed.

Notice that Black did not raise a constitutional objection to the provision as vague or overbroad.  However, according to SCOTUSBlog, the justices this morning really, really wanted to talk about that.  (Can't access deep link to post at this time -- was top post at 1:30 p.m. CST).   I guess it makes sense that if the court was going to grant cert to three honest services cases this term with all different facts, it wasn't just interested in chipping at the boundaries.

Bruce Weyhrauch, a state legislator in Alaska, is charged with depriving the State of Alaska with his honest services after voting in such a way as to lower the tax rate for an oil services company that he had hoped to work for after leaving office, but never did.  Although state law did not require him to disclose this potential conflict, the federal prosecutors aren't as forgiving.  Here is the question presented in that case, which is fairly narrowly tailored:

•Whether 18 U.S.C. § 1346, by criminalizing denials of "the intangible right of honest services," mandates the creation by the federal courts of a federal common law defining the disclosure obligations of state government officials.

I guess we'll have to wait until later to see what the Justices wanted to talk about with Mr. Weyhrauch.

And, waiting on deck is Jeff Skilling, who is taking the well-traveled road for Enron defendants from the Southern District of Texas through the Fifth to the SCOTUS.  Briefs are not online yet for this unscheduled case, Skilling v. United States, but here are the questions presented in that case:

•1. Whether the federal "honest services" fraud statute, 18 U.S.C. § 1346, requires the government to prove that the defendant's conduct was intended to achieve "private gain" rather than to advance the employer's interests, and, if not, whether § 1346 is unconstitutionally vague.

2. When a presumption of jury prejudice arises because of the widespread community impact of the defendant's alleged conduct and massive, inflammatory pretrial publicity, whether the government may rebut the presumption of prejudice, and, if so, whether the government must prove beyond a reasonable doubt that no juror was actually prejudiced.

Note that the second QP goes to whether venue should have been transferred. Whatever your thoughts are on the necessity of venue transfers, if one would ever be granted in a non-criminal trial, I can't imagine a set of facts more compelling than the Skilling/Lay trial in Houston, Texas.

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